I Was So Impressed With This New British Bank That I Opened An Account

Metro Bank's Holborn offices really look more like a cinema than
a bank. When I first stepped in, there was none of the
library-like silence I'm used to at my own branch. It felt much
more like what Metro Bank prefers it's branches to be called: a
"store."

Chairman Vernon Hill is pretty much what you would expect from an
American opening a bank in the UK. He's bullish, straight to the
point, and busy.

"You look about 11 years old online," was the first thing he said
when I met him "but you look at least 12 in person."

It's quite hard not to be taken in by the patter and glitz: and
clearly I have been. I just signed up for an account. But that's
also a sign of how drab and uncompetitive British banking
is.

Metro Bank is one of a wave of
"challenger banks" sniping at the big UK institutions: these
include stand-alone firms like Aldemore and
OneSavings
Bank, as well as established consumer firms that have dived
into banking, like Virgin, Marks & Spencer and
Tesco.

Our model is based in America and in Britain on service and
convenience... This is in a market where the big five banks
have run a cartel for years and taken the consumer for granted.
I like to say that the major banks here, service is sort of a
glaze on top of their business.

We're operating pretty much like we did in America, where New
York was our number one market. Everything with did in America
works better in Britain. The hours, the service, the the
convenience, the dogs (see below), the coin counting, all
the gimmicks. The myth was that Brits wouldn't switch banks...
About 400,000 people have switched to us in just over 4 years.
That's about triple my Manhattan growth rates. So we would say
that's a myth...

They also have a philosophy that they're doing you a
favour by letting you bank with them. They have a word for it,
they let you apply for an
account... We learned to operate on a much more competitive
world where if we didn't provide something different we weren't
gonna be around long.

Business Insider

The sort of gimmicks Hill
mentioned are easy to see in the store: they've got coin-counting
and sorting machines, along with water bowls for customers' dogs
(Hill is a dog owner). He goes on:

The British banks, I've said
this may times before, they have or had a cartel going and
because of that they could overcharge, under-serve, and they've
massively under-invested in their business. All you have to do is
walk past any UK bank branch to see what the word
"underinvestment" means.

But it's not just a series of
gimmicks that's brought nearly half a million people to the bank,
which only set up in the UK in 2010. The bank is open pretty
much-year round (362 days), and runs until 8 p.m. on weekday
evenings.

It doesn't seem to be competing
largely on price: nobody at any point raised the interest rates
offered on the accounts (though they are displayed prominently in
the branch). It seems like they're betting that interest rates on
most bank accounts are now so low that there's not very much to
differentiate them.

The emphasis is almost totally
on service and efficiency, and Hill says it's picking up business
customers too:

We're more than half commercial here, because as under-served
as consumers are, the SME segment up to middle-market size is
massively under-served by the UK banks. It's incredibly
difficult for them even to open an account.

One of the problems with the British banks are that their IT
systems are one step above a quill. They're way out of date,
the banks have admitted it. You can't deliver service even if
you want to if your IT doesn't give you the information you
need.

The generous opening hours
at Metro Bank are one of its major selling points.REUTERS/Toby Melville

That's one noticeable thing about Metro bank: as is
understandable for a new bank, it doesn't have the legacy IT
problems that older institution struggles with. Each desk has a
Windows tablet to process new accounts, there's not a desktop
computer in sight.

We've raised £650m in capital. It's 95% American money. You
could look at Metro bank as a billion dollar investment in
British banking... The Americans had seen me do this once
before at Commerce. Over and beyond that, it's obvious to me
that American investors will always invest for growth. British
institutional stock investors seem to be reluctant to invest
for growth...

At the rate we're growing I'm sure we'll make that (entering
the FTSE 100) happen. We've announced that our plan is to float
in 2016, and we expect to have by 2020 assets over £25 billion
($). Which should give us a market cap of around £4-5 billion,
that is definitely FTSE 100.

We should be turning into the black around the time we float,
I'm not sure exactly what quarter. While that's important to
us, it's not as important as growing our business and building
our brand.

So a few days after talking to Hill, I went back into the store
to sign up for an account. I'm happy to be rid of my previous,
unnamed bank. What's most interesting about Metro Bank is that I
barely even needed to be convinced.
Satisfaction with the big four banks is below 60%,
so they're working with an extremely receptive
audience already. If other people in the UK are anything like me,
get used to Metro Bank.